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Page
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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3
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FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2004 AND 2003 AND
FOR THE YEAR ENDED DECEMBER 31, 2004:
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Statements of Net Assets Available for Plan Benefits
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4
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Statement of Changes in Net Assets Available for Plan Benefits
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5
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Notes to Financial Statements
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6-10
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SUPPLEMENTAL
SCHEDULES:
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Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets (Held
At End
Of Year) as
of December 31, 2004
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11
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SIGNATURES
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12
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As
of December 31, 2004
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As
of December 31, 2003
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Allocated
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Unallocated
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Total
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Allocated
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Unallocated
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Total
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ASSETS:
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Investments
in shares of Dime Community Bancshares, Inc.
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common stock, at fair value
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$34,307,805
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$29,394,734
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$63,702,539
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$37,115,877
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$36,716,490
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$73,832,367
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Investment
in short-term investments and cash equivalents
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535,011
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-
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535,011
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440,415
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-
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440,415
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Total
investments
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34,842,816
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29,394,734
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64,237,550
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37,556,292
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36,716,490
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74,272,782
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Contributions
receivable from the Dime Savings Bank
of Williamsburgh
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-
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409,035
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409,035
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-
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399,150
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399,150
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TOTAL
ASSETS
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34,842,816
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29,803,769
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64,646,585
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37,556,292
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37,115,640
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74,671,932
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LIABILITIES:
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Borrowing
from Dime Community Bancshares, Inc.
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-
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4,749,430
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4,749,430
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-
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5,202,366
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5,202,366
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Due
to The Dime Savings Bank of Williamsburgh 401(k)
Plan
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-
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409,035
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409,035
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-
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399,150
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399,150
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Cash
dividend payable to participants
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249,523
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247,256
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496,779
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190,455
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218,796
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409,251
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TOTAL
LIABILITIES
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249,523
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5,405,721
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5,655,244
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190,455
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5,820,312
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6,010,767
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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$34,593,293
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$24,398,048
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$58,991,341
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$37,365,837
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$31,295,328
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$68,661,165
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Allocated
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Unallocated
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Total
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ADDITIONS:
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Investment
income
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$997,191
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$990,725
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$1,987,916
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Investment
activities - net depreciation in market value of Dime CommunityBancshares,
Inc.
common stock
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(4,691,949)
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(4,649,244)
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(9,341,193)
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Total
investment activities
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(3,694,758)
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(3,658,519)
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(7,353,277)
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Contributions
from Dime Savings Bank of Williamsburg - net
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-
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648,232
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648,232
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Total
additions
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(3,694,758)
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(3,010,287)
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(6,705,045)
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DEDUCTIONS:
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Cash
disbursed for interest expense on borrowings from Dime
Community Bancshares, Inc.
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-
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416,190
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416,190
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Benefit
payments
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2,520,129
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28,460
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2,548,589
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Total
deductions
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2,520,129
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444,650
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2,964,779
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TRANSFERS:
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Allocation
of 149,219 shares of Dime CommunityBancshares, Inc. common stock
to participant accounts - net
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2,451,618
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(2,451,618)
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-
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Transfer
of dividend income for distribution to participants
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990,725
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(990,725)
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-
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Total
transfers
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3,442,343
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(3,442,343)
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-
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DECREASE
IN NET ASSETS AVAILABLE FOR PLAN BENEFITS DURING THE
YEAR
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(2,772,544)
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(6,897,280)
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(9,669,824)
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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Beginning
of year
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37,365,837
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31,295,328
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68,661,165
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End
of year
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$34,593,293
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$24,398,048
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$58,991,341
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1.
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SUMMARY
DESCRIPTION OF PLAN
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a.
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General
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The ESOP was adopted by the Board of Directors of the Dime Savings
Bank of
Williamsburgh (the “Bank”) on February 8, 1996, with an effective date of
July 1, 1995.
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On
June 26, 1996, the Bank converted from a federally chartered mutual
savings bank to a federally chartered stock savings bank and all
of its
outstanding capital stock was acquired by Dime Community Bancshares,
Inc.
(the “Company”). Simultaneously, the Company issued 49,097,812 shares of
common stock [adjusted for stock splits that occured on August 21,
2001,
April 24, 2002 and March 16, 2004 ("Stock Splits") ] in a Subscription
and
Community offering. The ESOP purchased 3,927,825 (adjusted for Stock
Splits), or 8%, of the shares issued by the Company in its community
offering at the initial issuance price of $2.96 per share (adjusted
for
Stock Splits).
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The
ESOP is designed to comply with Section 4975(e)(7) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended (the
“Code”),
and is subject to the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). The ESOP is
administered by the plan administrator, who is appointed by the
Compensation Committee. Prior to September 2002, the trust services
department of HSBC Bank, USA acted as the trustee for the ESOP. In
September 2002, RSGroup Trust Company assumed trustee responsibilities
for
the ESOP and currently serves as
trustee.
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In
order to purchase the shares of the Company’s common stock, the ESOP
obtained a borrowing from the Company of $11,638,000, which, as of
June
30, 2000, was to be repaid over a ten-year period at a fixed interest
rate
of 8.0%. Effective July 1, 2000, the maturity of the ESOP loan was
extended from June 2006 to December 2025, with the continued option
of
prepayment. Repayments of the borrowing are made from fully deductible
contributions from the Bank to the ESOP. As the ESOP makes each payment
of
principal on the borrowing, an appropriate percentage of stock will
be
allocated to eligible participants accounts in accordance with applicable
regulations under the Code.
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The
borrowing is collateralized by the unallocated shares of stock held
by the
ESOP. The Company, as lender, has no rights against shares once they
are
allocated under the ESOP. Accordingly, the financial statements of
the
ESOP for the years ended December 31, 2004 and 2003, present separately
the assets and liabilities and changes therein pertaining
to:
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the
accounts of employees with vested rights in allocated stock (Allocated)
and
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| (2) | stock not yet allocated to employees (Unallocated). |
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b.
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Eligibility
and Participation
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All Eligible Employees, defined as salaried, common law employees
of the
Company or the Bank and its subsidiaries, who have completed a period
of
service of at least one year, automatically become eligible participants
of the ESOP. An employee is not an eligible employee if he or she
is
compensated principally on an hourly, daily, commission fee or retainer
basis, or has waived any claim to membership in the
Plan.
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c.
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Contributions and
Distributions -
The Company or the Bank shall contribute to the ESOP an amount which,
at
minimum, shall serve to finance the ESOP’s obligation under its
outstanding borrowing from the Company. The Company or the Bank may
contribute additional amounts, if designated by the Compensation
Committee, to the ESOP, which shall be applied as a prepayment of
principal or interest for the outstanding borrowing from the Company.
Any
additional contributions approved by the Committee shall be treated
as an
ESOP contribution and shall be allocated among the accounts of Eligible
Participants in accordance with a pre-established formula. Participant
contributions are not permitted.
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Effective
July 1, 2000, the Company or Bank also makes a required 100% vested
cash
contribution to all participants in the ESOP in the amount of 3%
of
“covered compensation” [defined as total W-2 compensation (including
amounts deducted from W-2 compensation for pre-tax benefits such
as health
insurance premiums and contributions to the Dime Savings Bank of
Williamsburgh 401(k) Plan); and, effective March 1, 2004, minus any
amount
included in W-2 compensation as a result of the grant or vesting
of
restricted stock, the exercise of stock options or the disqualifying
disposition of incentive stock options] up to applicable IRS limits.
This
contribution is guaranteed through December 31, 2006 (unless the
ESOP is
terminated before then) and will be discretionary after that date.
This
contribution is automatically transferred to the Dime Savings Bank
of
Williamsburgh 401(k) Plan (the “401(k) Plan”) whereby the participant has
the ability to invest this contribution in any of the investment
options
offered under the 401(k) Plan. This annual contribution is made in
the
first quarter of each year based upon the total covered compensation
through December 31st
of
the previous year. In March 2004, a contribution of $399,150 was
made to
the ESOP and transferred to the 401(k) Plan. In March 2005, a contribution
of $409,035 was made to the ESOP and transferred to the 401(k)
Plan.
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Effective
July 1, 2000, cash dividends received on allocated and unallocated
holdings of Dime Community Bancshares, Inc. common stock are distributed
quarterly to all ESOP participants. These distributions are made
in the
form of a cash payment. Otherwise, no distributions from the ESOP
are made
until a participant retires, dies (in which case, payment are made
to his
or her beneficiary or, if none, his or her legal representatives),
or
otherwise terminates employment with the Company or the Bank and
its
subsidiaries. Distributions are made in cash and/or stock
payments.
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d.
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Vesting
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The balance credited to each Participant’s account shall become vested in
accordance with the following
schedule:
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Number
of Years Of Service
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Vested
Percentage
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Less
than 2 years
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0%
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Less
than 3 years
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25
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Less
than 4 years
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50
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Less
than 5 years
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75
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5
or more years
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100
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Under
the provisions of the ESOP, participants were granted credit, for
purposes
of vesting, for years of service at the Bank prior to the establishment
of
the ESOP. Any
previously unvested portion shall become fully vested to participants
upon
attainment of age 65, or, if earlier, upon the termination of his
or her
participation by reason of death, disability, retirement or upon
occurrence of change in control of the the Company or the Bank.
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e.
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Investments
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As of December 31, 2004 and 2003, the ESOP’s investments consists of the
investment in common stock of the Company and the investment of cash
balances in a short-term investment funds administered by the ESOP
trustee. The ESOP is permitted, under the Plan Document, to invest
in any
commingled or group trust fund, or common trust fund that are exempt
from
taxes under Section 501(a) of the Internal Revenue
Code.
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f.
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Allocation
of Shares to Participant Accounts -
As of the last day of each plan year during which a borrowing is
outstanding, a portion of the financed shares purchased with the
proceeds
of the borrowing shall be released in accordance with a predetermined
formula. The released shares are allocated to eligible participant
accounts in the proportion that each such eligible participant’s
compensation, as measured under the terms of the Plan Document, for
the
portion of the immediately preceding calendar year during which he
or she
was a participant, bears to the aggregate compensation of all eligible
participants, as measured under the terms of the Plan Document.
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Released
shares allocated to participant accounts totaled 149,219 during the
year
ended
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Each
participant’s account reflects an allocation of the Bank’s contributions,
ESOP earnings and the forfeiture of terminated participant non-vested
accounts.
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Each
participant is entitled to exercise voting rights attributable to
the
shares allocated to his or her account and is notified by the ESOP
trustee
prior to the time that such rights are to be exercised. The ESOP
trustee
is permitted, upon grant of authority by the Plan Administrator,
to vote
shares for which instructions have not been given by a participant
within
the stated time period. Such vote is made in direct proportion to
the
votes received from participants.
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g.
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Forfeitures -
Upon the termination of employment of a participant or former participant
for reason other than death, disability, or retirement, that portion
of
the balance credited to his or her account which is not vested at
the date
of termination shall be forfeited as of the last Valuation Date,
defined
as the last business day of March, June, September or December. The
proceeds of such forfeitures shall be treated as loan repayments
and ESOP
contributions as designated by the ESOP committee.
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There
were 8,870 shares forfeited during the year ended December 31, 2004.
There
were 762 shares forfeited during the year ended December 31, 2003.
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h.
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Payment
of Benefits
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On termination of services due to death, disability, retirement or
other
reason, a participant may elect to receive a lump-sum amount equal
to the
value of the participant's vested interest in his or her account.
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i.
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ESOP
Termination
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The Company reserves the right to terminate the ESOP at any time,
subject
to the provisions of ERISA. Upon such termination of the ESOP, the
interest of each participant in the ESOP will be distributed to such
participant or his or her beneficiary at the time prescribed by the
ESOP
provisions and the Code. Upon termination of the ESOP, the Compensation
Committee shall direct the ESOP trustee to pay all liabilities and
expenses of the trust fund and to sell the shares of financed stock
held
in the loan suspense account to the extent it determines such sale
to be
necessary in order to repay the
borrowing.
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2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
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Basis
of Accounting
- The
accompanying financial statements of the ESOP have been prepared
in
accordance with accounting principles generally accepted in the United
States of America.
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Investment
Valuation and Income Recognition
- The
shares of Dime Community Bancshares, Inc. common stock are valued
at fair
value based upon the closing price stated in the Wall Street Journal.
On
March 16, 2004, the Company paid a 50% stock dividend having the
effect of
a 3-for-2 stock split and the price of the Company’s common stock was
adjusted accordingly. The closing price of the common stock was $17.91
as
of December 31, 2004 and $20.51 as of December 31, 2003 (as adjusted
for
the 50% stock dividend paid on March 16,
2004).
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Investment
transactions are accounted for on a trade-date basis. Interest income
on
short term investments is recorded on the accrual basis and dividend
income on shares of Dime Community Bancshares, Inc. common stock
is
recorded on the ex-dividend date. During the years ended December
31, 2004
and 2003, cash dividends totaling $1,983,022 and $1,494,841, respectively,
were declared on the Company's common stock, which were recorded
in
Investment Income in the Statement of Changes in Net Assets Available
for
Plan Benefits. All dividends on unallocated shares and shares allocated
to
each participant are distributed to participants in the ESOP no later
than
the close of the calendar quarter after the calendar quarter in which
such
dividends are received by the ESOP.
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Use
of Estimates
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The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
Plan management to make estimates and assumptions that affect the
reported
amounts and disclosures in the financial statements. Actual results
could
differ from these estimates.
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Risks
and Uncertainties
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The Plan includes an investment security (concentrated solely in
the
Company’s common stock) which, in general, is exposed to various risks
such as interest rate, credit and overall market volatility. Due
to the
level of risk associated with investment securities, it is reasonably
possible that changes in the value of investment securities will
occur in
the near term and that such changes would materially affect the amounts
reported in the statement of net assets available for plan
benefits.
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Reclassifications -
Certain amounts as of and for the year ended December 31, 2003 have
been
reclassified to conform to the presentation for the year ended December
31, 2004.
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3.
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FEDERAL
INCOME TAXES
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4.
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RELATED
PARTY TRANSACTIONS
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5.
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INVESTMENTS
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December
31, 2004
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December
31, 2003
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Allocated
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Unallocated
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Allocated
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Unallocated
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Shares
of Dime Community Bancshares, Inc.
Common Stock:
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Number
of shares
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1,915,567
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1,641,247
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1,809,942
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1,790,466
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Cost
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$5,753,896
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$4,900,038
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$5,439,547
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$5,345,540
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Market
Value
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$34,307,805
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$29,394,734
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$37,115,877
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$36,716,490
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Parties
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Description
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in
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Identity
of
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of
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Interest
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Issuer
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Investment
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Cost
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Current
Value
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*
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Dime
Community
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||||||
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Bancshares,
Inc.
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Shares
of common stock
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$10,653,934
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$63,702,539
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*
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RS
Group
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Short-term
investment fund
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535,011
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535,011
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Total
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$11,188,945
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$64,237,550
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